Update for Study on Integrated Shield Plan Portability and Measures to Safeguard Policyholders' Interests

Mr Speaker, the suggestion for Integrated Shield Plan (IP) insurance to be made portable has been raised a number of times. The Ministry of Health (MOH) has carefully studied the issue, including the arrangements in other countries.

The calls for portability of IPs stem mainly from three groups of policyholders: those who are unhappy with changes in the terms of their policy coverage imposed by their insurer; those who faced difficulties in making claims; and those who find it difficult to afford their IP premiums as they become older. Hence, they want to switch to another plan offered by another insurer but realised that they have to undergo another round of underwriting and may not be able to preserve the coverage they already have or they have to pay more premiums.

The conclusion is that IP portability – allowing all IP policyholders to switch insurers freely – will enhance competition and improve bargaining power of IP policyholders.

IP portability is generally uncommon across the world, as it is usual practice for insurers to underwrite new policies in order to price the risks of accepting more policyholders with pre-existing conditions into their risk pool. Underwriting can result in the insurer imposing additional conditions on the policyholder’s coverage, such as a waiting period during which no claims will be paid or exclusions to the coverage. Policyholders may also have to pay higher premiums in view of the higher risks.

For countries that ensure full portability where policyholders can switch insurers without underwriting, it is usually a feature limited to their mandatory, national health insurance. For example, in the case of the Netherlands or Switzerland, universal coverage is mandated but administered by private insurers. These private insurers are, therefore, required to accept any applicant, regardless of whether they are switching from another insurer or are uninsured previously. This gives the impression that the commercial insurance is portable, but actually it is not, as only the basic coverage under the universal, national health insurance scheme is fully portable. These countries do have supplemental, private insurance, which involves underwriting and is not portable.

Our parallel is MediShield Life. As our national health insurance scheme, MediShield Life covers all residents, regardless of age, health status, personal insurance or employer coverage. This ensures that all residents enjoy a basic level of protection against large hospital bills. Last month, MOH announced a set of enhancements for MediShield Life which will be progressively implemented from April 2025. We will continue to ensure that MediShield Life stays relevant and affordable to Singaporeans as our national health insurance scheme.

Australia and Ireland are two notable examples that have implemented full portability for non-national, supplemental private health insurance plans. But they did so for different reasons than one may think. In Australia, private hospital care accounts for close to half of admissions. So, good uptake of private health insurance, including through features like full portability, is integral to support access. As for Ireland, private insurance was initially introduced for a population segment who was not eligible to receive free treatment under their public healthcare system. Private insurance with full portability was established to ensure that the segment previously mentioned had protection against large bills. This feature continued to be retained even as policy reforms later extended universal access to public hospital care to this group.

In all instances where full portability between private insurers is ensured, whether in the Netherlands, Switzerland, Australia or Ireland, additional compensation mechanisms need to be established. In other words, for insurance company A to take over from insurance company B, a policyholder with a pre-existing condition and of higher risk, A will receive compensation from B.

To facilitate this compensation system, countries set up a risk equalisation fund, usually funded with public monies and insurer contributions and where a neutral body facilitates transfer payments between insurers. Insurers with a lower-than-average risk profile provide net funding into the fund while insurers with a higher-than-average risk profile receive net funding from the fund. Significant additional national resources will need to be set up and to administer the fund. If we do this, it will be a whole new department.

For these reasons, MOH does not believe that mandating full portability for IPs is the right solution for the issues faced by policyholders. Most of all, it is not an international best practice for supplementary and commercial personal health insurance to be fully portable.

Fundamentally, for the group of IP policyholders with pre-existing conditions, the issue may not be a lack of competition among insurers, but that insurers are not actively competing for this group of customers. It is because their probability of claims is higher, which means that insurers may have to pay out to them more than what they collect in premiums. For IP policyholders with pre-existing conditions, the assurance for them is that the Government always stepped in to ensure that MediShield Life will cover them for their pre-existing conditions, even if their private insurance does not.

The best way to provide assurance to everyone is to keep healthcare costs manageable. At the national level, MOH will continue to look at measures to manage healthcare costs and ensure that all Singaporeans have access to good and affordable basic healthcare.

Mr Speaker, I thank the Minister of State for her comprehensive and, if I may say, expansive and deeply considered answer. If I may just have some preamble to frame some of the issues my residents in Clementi face, followed by supplementary questions, and I beg Speaker's indulgence.

Sir, I have Clementi residents in their 50s and 60s, who bought IPs years, even decades ago, who were told at the time by the insurers' marketing team they could choose their preferred doctor and have peace of mind on treatment choices. Today, I have residents who ask if the insurers have moved the goalposts. Sometimes, the doctor now must be on a panel, but the criteria are not always clear. Sometimes, the insurer has changed the access to policy benefits or how the coverage is administered. Can I ask the Minister of State, notwithstanding the difficulties with portable IP insurers, does the Minister of State agree that these challenges faced by middle-aged Singaporeans, existing policyholders, are real in their lived experience?

Secondly, does the Minister of State also agree that, today, given IP insurers enjoy extra access to deduct from the Central Provident Fund MediSave up to the additional withdrawal limits, does the Minister of State agree that not every insurance product enjoys this privilege and therefore, should the IP insurers have a sense of social responsibility, or even some social compact towards these policyholders? And will MOH, therefore, keep a close watch on the insurers, their profit margins and how they approach these policyholders?

Lastly, if I may quote Minister Ong Ye Kung who, on 27 April 2024, was reported in The Straits Times online as saying, he "really hope the insurance industry takes a hard look at the fundamental design of their policies, their riders, how to make it sustainable for the long term". Does the Minister of State agree that there are policyholders who did not ask to be sold products which were unsustainable, and if it can be proven that some insurers sold products knowing the products would be unsustainable someday, does that change the weight of thinking and support towards these policyholders more?

I note the questions raised by Members. Indeed, these issues are real issues. And the Member highlighted the point about the IP products being of a special category, because you can tap on your MediSave to pay for your premiums. So, certainly, we agree that the IP insurers must have a sense of social responsibility towards policyholders and this includes ensuring that their products are sustainable. They cannot compete for the market to the point that they then are unable to sustain the product, which is what is happening now.

To the Member's question as to whether we can scrutinise this, we are indeed scrutinising it quite intently and this is because we are seeing some of these challenges. What we are seeing is that the companies are either barely breaking even or making losses from their health portfolios, and this is an issue of concern.

The Member also raised the issue of moving of the goalposts. I will make a few points in this respect.

Firstly, we should note that it really depends on the contract because it is not just what was sold or bought. It is what are the terms in the contract that parties had agreed upon.

Secondly, actually at an individual level, we can appreciate that it is quite human nature; individuals want to be fully protected and they want maximum coverage, so be covered for everything. And the response and the motivation by the insurance company is then to actually create these products to cater to all these expectations of the customers.

But the third point, the more important point, is really this. We need to understand that at the national level, this will all cost and contribute to higher costs. And this is where the Ministry's concerns lie and this is what the Member alluded to. We need to take a close look at this because there appears to be a race to the bottom and we are constantly worried that these private policies are not sustainable.

That is the key thing that we need to look at because the change in terms is really a sign of this happening. Insurers need to take a step back and renew their fundamental designs of their schemes. It cannot be about enhancing the payouts to get the market share and when the sums do not work out, then they adjust the terms. So, that is the point that the Minister for Health was trying to address and that is indeed why we are calling for a fundamental redesign of the system.